According to a report from the Wall Street Journal (via MarketWatch), the Treasury Department is dismissing pressure from General Motors to sell the remainder of its stake in the automaker. According to the report, executives at General Motors are irritated by the Treasury’s ownership position and say that it hurts the automaker’s reputation and hampers its ability to attract top talent due to pay limitations.
In addition, the automaker reportedly presented a plan to repurchase 200 million of the 500 million shares held by the Treasury, with the balance to be sold via a public offering. However, Treasury officials maintained that selling would result in multibillion dollar loss for the government.
As a reminder, individual and institutional investors are currently the biggest cumulative owner of GM stock, being in control of 44.9 percent of the company. The U.S. Treasury owns nearly 32 percent of The New GM, while the Canadian Government and VEBA own 9 and 10.2 percent, respectively. All of this is, of course, the result of the $50 billion bailout in 2009 as well as GM’s subsequent Initial Publish Offering in 2010.
The GM Authority Take
Of course, this remains a morass of a topic that no one seems to enjoy discussing… and given the looming presidential election and the political consequences associated with the matter, we don’t expect any moves to be made until two possible scenarios take place:
- GM has enough cash to buy the remaining stake itself — something we don’t foresee happening until it can a) finish handling its pension liabilities and b) get its European operations into the black. Separately, could it be that GM was seeking an increase in its credit line for the purpose of buying out its shares itself? If so, this DBRS rating should help.
- GM’s stock appreciates to a point that makes sense for the U.S. Treasury to sell its stake. But then, when would the other private owners sell their shares?
Until one of these events takes place, we can only sit tight and not let the nitwits bite.